Half Year Results 2018 Presentation 23 FEBRUARY 2018 YOUR COMMUNITY DEVELOPER
Table of Contents What we do 3 Business update and financial results 4 The market and our strategy 17 Outlook for 2018 23 Investment proposition 24 Appendix – Project pipeline 25 - 2 -
Developing affordable housing and building communities BUY LAND DEVELOP BUILD & SELL COMMUNITY SELL Selling land only Purchasing land in Developing and sub- Building and selling a Creating communities urban growth dividing with a diversified product sustainable corridors in Australia mix – land, homes, commercial approach and New Zealand townhouses, apartments Established in 1932, AVJennings continues to be one of the most recognised residential property development brands. - 3 -
1H18 Highlights – positive momentum continues BALANCED CAPITAL STRONGER GROWING MANAGEMENT FINANCIALS BUSINESS APPROACH Significant advancement of Increased shareholder Revenue $185.8m +19.1% major projects in Vic. returns: dividend +33.3% PBT $22.4m +9.5% (Waterline, Lyndarum North) to 2 CPS and QLD (Riverton) PAT $15.5m +9.5% Investing in the business: Strong WIP pipeline of ~2k Underlying PAT +46.0% Inventory maintained at ~10k lots Debt to total assets ~25% Cash receipts from 860 lots acquired customers +25.8% 587 settlements. - 4 -
New projects driving growth PROJECT STATE LOTS FY17 FY18 FY19 FY20 DEVELOPMENT 1 WATERLINE VIC 419 START 2 BRIDGEMAN DOWNS 2 QLD 16 3 LYNDARUM NORTH VIC 2,136 FIRST CONTRACT SIGNINGS BOUNDARY RD, 4 NSW 11 SCHOFIELDS FIRST 5 SPRING FARM EAST NSW 486 SETTLEMENTS 6 SPRING FARM NSW 79 7 RIVERTON QLD 1,196 SETTLEMENTS CONTINUE 8 BRIDGEMAN DOWNS 1 QLD 63 9 COBBITTY RD, COBBITTY NSW 57 ~58% of the inventory pipeline is in these 10 WARNERVALE NSW 595 projects. 11 KOGARAH NSW 67 12 ROCHEDALE QLD 81 Activity is based on 13 DEEBING HEIGHTS QLD 210 forecast project plans. 14 HAYES LANE, HUNTLEY NSW 205 15 RIPLEY 1 QLD 294 - 5 -
Growing business INCREASED RETURNS INCREASED NET FUNDS EMPLOYED WORK IN PROGRESS ($M) (LOTS) 2,161 1,991 $563 1,880 $545 1,623 1,681 1,539 1,512 $496 1,264 974 $426 $397 715 554 FY14 FY15 FY16 FY17 1H18 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 - 6 -
Good momentum across major projects Waterline at Williamstown (Vic) Lyndarum North (Melbourne) Riverton at Jimboomba (Brisbane) • • • 328 lots sold (contract signed) 49 GEM Apartments of 89 sold Civil construction started Dec since development launch in (contracts signed) 2017 Dec 2016 • • GEM project value $92m, Significantly advanced • Revenue recognition to construction commenced Jan negotiations for the planned commence mid CY2018 2018 display village • • Minor revenue recognition in 1H18 Release of stage 1 (86 lots) in late from the remaining Rosny Feb 2018 apartments and Ellery townhomes settled - 7 -
Increasing average contract value as we sell more built form product AVERAGE CONTRACT VALUE* ($k) Total Co. $312 $296 $292 Total Co. $273 (excl. NZ) $246 $235 FY16 FY17 1H18 This is an intentional re-balancing of our product pipeline towards retail customers and more built form. Built form increases the project value and extends the amount of time between development starting and settlement. * Average contract value is based on net contract price to AVJennings - 8 -
Contract signings CONTRACT SIGNINGS (LOTS) • 730 NSW reduction in contract signings on PCP primarily due to approval delays and strategy to produce more built form 342 product which takes longer to complete 454 and is sold later in the production cycle • NZ (Auckland) decrease in contract 158 290 signings due to the delay in the acquisition of the latest precinct in the Hobsonville 40 230 project. 124 1H17 1H18 NSW NZ Rest of Business - 9 -
1H18 settlements and revenue driven by strong results from NSW projects SETTLEMENTS (LOTS) REVENUE BY REGION $186m +19.1% 1H $156m 2H 902 878 933 713 562 694 660 587 576 541 267 1H17 1H18 FY13 FY14 FY15 FY16 FY17 FY18 NSW VIC QLD SA NZ - 10 -
Stronger financial results REVENUE ($M) EARNINGS AND DIVIDEND GROWTH (CPS) 4.3 187.2 185.8 4.03 156.0 3.1 3.7 118.5 104.3 2.2 2 1.5 1.5 1 1H14 1H15 1H16 1H17 1H18 1H14 1H15 1H16 1H17 1H18 DPS EPS EPS linear trend 4-YEAR CAGR Revenue linear trend 4-YEAR CAGR 15.5% 16.3% - 11 -
1H18 Results – financial summary 1H18 1H17 % Change FY17 FY16 REVENUE $185.8m $156.0m +19.1% $401.6m $421.9m STATUTORY PROFIT BEFORE TAX $22.4m $20.4m +9.5% $51.0m $58.8m STATUTORY PROFIT AFTER TAX $15.5m $14.1m +9.5% $35.7m $40.9m GROSS MARGINS 25.6% 26.0% (0.4pp) 24.0% 25.2% INVENTORY PROVISION WRITE BACK $0.0m $3.5m (100%) $3.5m $2.6m (AFTER TAX) NET TANGIBLE ASSETS (NTA) $379.9m $362.3m +4.8% $378.2m $361.1m NTA PER SHARE $0.99 $0.95 +4.8% $0.99 $0.95 EPS (CENTS PER SHARE) 4.0 3.7 9.2% 9.3 10.7 DIVIDEND FULLY FRANKED (CPS) 2.0 1.5 33.3% 5 5 - 12 -
1H18 Results – Balance Sheet $ MILLIONS December 2017 June 2017 CURRENT ASSETS Cash and cash equivalents 19.5 15.6 Inventories 174.9 211.1 Page to be Total Current Assets 316.7 351.6 NON-CURRENT ASSETS updated Inventories 363.0 308.1 Total Non-Current Assets 361.2 388.4 TOTAL ASSETS 705.1 712.8 CURRENT LIABILITIES Trade and other payables 55.0 75.6 Total Current Liabilities 89.0 69.9 NON-CURRENT LIABILITIES Interest bearing loans and borrowings 197.0 177.0 Total Non-Current Liabilities 252.5 242.8 TOTAL LIABILITIES 331.8 322.4 NET ASSETS 381.0 382.7 - 13 -
1H18 Results – Cash Flow Statement $ MILLIONS 1H18 1H17 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 239.4 190.3 Payments to suppliers, land vendors and employees (224.7) (207.6) Net cash used in operating activities (1.0) (35.3) CASH FLOWS FROM INVESTING ACTIVITIES Payments for joint venture related activities (2.0) - Net cash (used in) / from investing activities (1.3) 0.3 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 112.6 67.7 Repayment of borrowings (92.6) (58.2) Net cash from / (used in) financing activities 6.5 (4.0) NET INCREASE / (DECREASE) IN CASH HELD 4.2 (39.0) - 14 -
Clear financial framework supports growth and maintains flexibility NET DEBT AND GEARING RATIO (net debt / total assets) • Maintaining financial flexibility: Gearing remains comfortable at 25.5% with $m total net debt $180 million 30.0% 180 • Gearing in the middle of targeted ratio of 20.0% 15% to 35% 90 • Current debt reflects continuing strong 10.0% investment in WIP and completed product that is expected to convert into cash in the 0 0.0% short term. June '15 Dec '15 June '16 Dec '16 June '17 Dec '17 Net Debt (LHS) Gearing (RHS) - 15 -
Lots under control +6.3% due to inventory replenishment around Sydney and Brisbane TOTAL LOTS HELD BY AVJENNINGS +6.3% in lots from June 2017 due to inventory replenishment. Recent 11,259 10,837 acquisitions include: 10,876 10,198 10,048 9,654 10,264 9,952 9,825 9,480 ➠ Kogarah (Syd); ~67 apartments 9,219 ➠ Huntley, greenfield site south of Syd; ~205 lots ➠ Ripley, Brisbane greenfield site; ~294 lots ➠ Deebing Heights, Brisbane greenfield site; ~210 lots FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1H18 - 16 -
Market supply and demand Source: ABS - 17 -
The residential real estate market in Australia ~200k homes under supplied; a ‘new Melbourne’ is needed approximately UNDER SUPPLY OF HOMES every 10 years to accommodate forecast population growth. HOUSING AFFORDABILITY While an ongoing issue it also provides great opportunity if it is achieved. POSITIVE MACRO- • Population growth • Stable employment • Low interest rates ECONOMIC CONDITIONS • Over-supply of inner city / CBD apartments in Melbourne and Brisbane. • Government taxation policy at all levels RISK • Costly and inefficient approval processes. Property is the largest industry in Australia* RELEVANCE • 11.1% of GDP, 1.1 million jobs – more than mining and manufacturing combined. • Residential sub- sector provides the majority of property’s economic activity. *Data source: www.propertycouncil.com.au August 2017 - 18 -
Market outlook continues to be supported by positive economic fundamentals POPULATION GROWTH INTEREST RATES EMPLOYMENT Employment outlook remains Historically low interest rates Population growth relatively stable expected to remain remains focused on Australia’s capital cities CASH RATE UNEMPLOYMENT RATE 9.0 18 16 8.0 14 7.0 12 10 6.0 8 5.0 6 4 4.0 Y E A R 2000 2 19m 3.0 0 2016 24m 2040 >31m Source: Australian Bureau of Statistics Source: Australian Bureau of Statistics Source: Australian Bureau of Statistics - 19 -
Our strategy is about delivering strong and sustainable results 2 3 1 Primary focus Maintain Strong, on horizontal geographic sustainable residential diversity business platform development 6 4 5 Attractive, high Target stable, Volume driven, quality product traditional not price driven that is customer profile affordable - 20 -
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